Medicare, Obamacare future? Snip, snip, snip.

Medicare and the new federal health-insurance program will boost costs that Congress will have to rein in.

By
David R. Francis /
February 15, 2011

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In this photo taken Jan. 23, 2011, Morty McKenna, is seen in his Pembroke Pines, Fla., home. Nearly a year after the national health care overhaul. Mr. McKenna and his wife are covered by a Medicare Advantage policy. The reform did not tackle rising costs in a meaningful way, which means that Congress will be forced to cut costs.

J Pat Carter/AP/File

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Congress is going to have to tackle rising health-care costs in Medicare and "Obamacare." House Republicans can try to repeal Obamacare or starve it for funds. Democrats can beat back such attempts. But the laws of economics still rule.

And so far health-care spending remains out of control. In 2009 it consumed 17.6 percent of the US gross domestic product, up one percentage point from the year before. It's more than twice as costly as what other advanced nations spend as a share of GDP. Yet America's average life expectancy is lower and it's advancing more slowly.

The high cost weakens America's international competitiveness. It also has hit poor people hard. Lawmakers thus must get more serious about cost controls. The question is how.

The health-care law passed last year was billed as a cost-cutter. It aims to extend health-care coverage to nearly all Americans without raising taxpayer costs too much.

The one reform Congress considered that really could have begun to change the cost equation – a so-called "public option" where government insurance would compete with the private sector – was dropped. The result: a system with far more bureaucracy and administrative costs than those of other industrial nations, says Wendell Potter, a former spinmeister for a major health insurance company. He calls the current bill "the Health Insurance Profit Protection and Enforcement Act."

Opponents of Obamacare are big obstacles to cutting health-care costs, says Mr. Potter, who is promoting his new book, "Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans."

For instance, critics of the 2,700-page bill have called it a "government takeover." That, says Potter, is "an intentional lie." The fact is that the health-care industry – physicians, nurses, hospitals, drug companies, clinics, insurance companies, etc. – remains in private hands though the government pays some of the bills. But competition for clients has "not worked" to cut costs, he says.

Potter, as a former public relations manager for CIGNA, charges that the health-care industry has deliberately tried to frighten Americans away from government efforts to cut costs. For instance, critics of Obamacare charged that it involved Medicare "death panels" that would determine care at a late stage in human life, sometimes involving expensive medical care. That's a "baldfaced lie," says Potter.

The reform law includes pilot projects aimed at shrinking medical costs, he notes. For instance, it grants money to establish cheaper "nurse practitioners" in areas where doctors are scarce.

But he admits cutting costs will be "easier said than done." Trimming costs in any substantive way would include cutting incomes of medical professionals (who are paid significantly more than their counterparts in other nations), drug-company executives (who charge US patients more for drugs than patients in other countries), and health-insurance executives. Potter's old boss at CIGNA had a salary of more than $20 million and got options and other benefits worth $111 million when he left the company in 2009.

The average American spent $7,538 on health care in 2008 versus an average of $3,000 in the 30 other advanced economies, according to the Organization for Economic Cooperation and Development in Paris. US health care is so expensive it has pushed many people into poverty. A recent Census Bureau report finds that without out-of-pocket medical expenses one measure of poverty would have dropped from 15.7 percent to 12.4 percent in 2009.